Soaring commodities: what the experts say
If Russia invades Ukraine the markets ‘will freak out’

Braced for war
Traders are bracing for war in Ukraine, says The Economist. Just how bad could things get? Helima Croft, head of commodity strategy at RBC Capital Markets (and a former CIA intelligence analyst), doesn’t mince words. “If Russian tanks cross the border, markets will freak out.”
Although the biggest impact would be on European gas markets, Russia’s “huge importance” as a commodities supplier means “shockwaves would spread far more widely”. It supplies nearly a tenth of the world’s aluminium and copper; 43% of palladium (used in catalytic convertors). It is the world’s “second-largest exporter of oil” and “the largest exporter of wheat”. The mere fear of disruptions has already sent prices up – Brent crude is approaching $90/barrel and could hit $120 if war breaks out, according to JP Morgan. And since “a big chunk” of Ukrainian wheat production takes place in regions exposed to invasion, it could have an “extraordinary” impact on prices. They could easily double.
Pass the lithium
Already reeling from a shortage of semiconductors, carmakers are facing a new “shock”, said Reuters Breakingviews – a crunch in the supply of the “cocktail of metal compounds” that are crucial to battery making, and therefore to the production of electric vehicles. General Motors noted this week that US sales of its EVs “had ground to halt” because of the dearth. The price of lithium has already rocketed 150% year-on-year. It could go higher. Although there’s no shortage of ore, it can take “up to ten years to bring a mine fully online”, and high demand is outstripping supplies. That dynamic is unlikely to change. UBS estimates that “demand for lithium could rise nearly tenfold by 2030”, while “supply may barely manage half that”.
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Go broad
The plethora of exchange-traded funds (ETFs) tracking prices has made investing in individual commodities much easier. But many investors worry about volatility risks. The solution is a broad-based fund, said Ceri Jones on Interactive Investor. She likes The WisdomTree Enhanced Commodity ETF, which gives “broad and diversified” exposure to “energy, agriculture, industrial and precious metals”. A good “active fund” option is the BlackRock World Mining Trust.
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